Thursday April 28th, 2011 Cooked bears with bear sauce

Today traded as expected. Higher.

I'm not going to get into elliot wave analysis in this post, but I do believe we are in a wave 3 of the final cycle wave 5 of this rally. Cycle wave 5 would be = to cycle wave 1 around 1367. But since I believe we are only in wave 3 of cycle 5, obviously I believe we are going higher than that.

Moving on to other issues/factors, I widened my view and looked at some 3 year charts of the Trannies, Russel and S&P, I think i've identified some very very near term resistance in the trannies and Russel and potentially where the S&P is heading.

Points;

1) The DOW Jones Transports made a new all time closing high today. It is within 40 points of an all time intra-day high. Once DJT has all time highs both intra-day and closing, we will have a long term DOW Theory bearish divergence until and unless the DOW makes it to 14600.

Long term though, it kinda looks double topish. We'll have to see what happens there next, to kill the double top look, DJT will need to really launch up a couple hundred points.

DJT Chart;



2) The Russel 2000 is in a similar situation. It made a new all time high today, but only by 7 points. So on a 3 year chart. It kinda has a double topish feel to it. IWM (The russel ETF) actually flash smashed straight up for 10-20% today. Those types of things are becoming more common. Unstable flash moves like that in large ETF's like IWM for such large percentages just can't be good.

IWM chart; (I didn't mark it, but that crazy line today straight up was the flash move)



3) The S&P looks like it's in a big wedge and rising slowly to what I think is likely to be resistance and will time out well with the potential EW count. I do think we are getting close to a short term top here, but only for a 3-4% move back down to the bottom of the wedge. That will be the correction for wave 4 of cycle 5. Then one more surge up to my target area and line of resistence in the following chart. Somewhere in the low 1400's.

S&P Chart;



I'm curious to see if the Trannies and Russel find big resistance here and sort of grind to a halt while the S&P finishes it's patter along with the DOW (which is the most bullish looking).

With QE2 expected to end in June and "sell in may and stay away" coming, I expect the bulk of these moves to come over the next month and potentially finish just as Ben is winding down QE2.

If the trannies and IWM break out and really launch higher as the S&P and DOW finish patterns, we will have to re-evaluate their charts and even potentially think about everything in this market heading to all time highs. The bubble to end all bubbles.

I think there's room to keep rallying tomorrow, but a short term pullback is near.

As always, keep an eye out for impulse selling and volume that would signal distribution. Until we see that, the robots will remain on buy.

Guess who's back...

So.. I had a baby. Time for blogging sort of went into the toilet for a while, but now that I have a better handle on the whole parenting thing and I've been doing nightly charts on tickerforum.org, I've decided to start this back up again with more detail that I normal insert into my trading thread on tickerforum.

Here we are almost 2 years later at 1355 on the S&P, 2 trillion dollars added to the FED's balance sheet and rates STILL at 0%. Sort of makes you go.. WTF?.. but that isn't the point of markets, asking why things are the way they are or if it makes sense. Markets rarely make sense.

Everything is on a buy right now. DOW made new highs, NAS made new highs, S&P made new highs, the Trannies finally confirmed the DOW and made a new high. We do have 1 holdout at the moment though in the SOX. The SOX is struggling here. Which is important because the SOX is a good look at future manufacturing demand. Semiconductors are in a lot of products and you need them to manufacture your product. So a strong SOX means businesses are expecting strong demand for products in the coming months. Right now, the SOX is lagging. But besides extreme bullish sentiment and such, it's one of the few bearish things I see at the moment.

Looking at the S&P, we have blasted out of an inverse head and shoulders pattern over the last 2 days. The target for this breakout is 1410-1430.

You have to go with the continuing uptrend here until something happens to indicate distribution or that there's another hidden problem looming.

Eventually of course all this money printing will come back to hurt us very very badly, but we do not know when, and we shouldn't guess. Just watch and follow for now and right now, just about everything is pointing up.

Here's the S&P inverse head and shoulders;



(Update 6:44 p.m.)

Since I haven't posted in awhile, I want to talk a bit about what Bernanke is doing and why we are going higher and why profits are doing so well despite the fact that most of us probably feel a little tight wallet right now and job security is mildly good at best.

Bernanke's main goals are to devalue the dollar, force interest rates down, force everyone into assets, which is to drive up asset prices. If you have a 1 million nest egg, if you had a CD available paying 5%, you could return 50k a year to live on. But at these rates, you'll be lucky to get 1.25% in a CD, giving you only 12,500$ to live on in order to not reduce your balance. That forces you into other assets, you have no choice. So extend that to corporations, pension funds, etc. Everyone that normally needed that 5% or more stable to functionally and safely operate. Those people are all forced into dividend paying stocks or whatever yield they can find.. seen REIT's near all time highs lately??

A bubble is being blown in anything with a yield.

In order to do what he's doing, he's expanding the FED's balance sheet at a tremendous rate with these QE programs. The resulting devaluation of the dollar is driving up commodity prices including oil. Eventually at some point, inflation will spark out of just food and energy and start creeping into general prices. This will start as a spark and very quickly flood into a wildfire. What would eventually cause this to happen is if wages began to rise. If people start making more money, they will pay more for things. Watch carefully for rising wages, it will be a spark to ignite the wildfire.

You might ask why profits have been so good, while things like real estate are still falling and making folks net worth fall. Well, it's a product of a falling dollar in 2 ways;

1) International conglomerates like IBM and CAT will greatly increase their sales overseas as the devaluation of the dollar makes their products/services cheaper and more competitive on the global market. Some companies have actually recently crossed some incredible lines where Asia and Europe now account for more than 50% of their revenue. I believe that was the case with 3M's report.

2) As dollars are devalued, companies are going to be paid more dollars where each is worth less for their products and services. Just as inflation drives asset prices higher, it will drive profits higher.

The key to all of this will be spotting the point at which Ben Bernanke loses this game. I suggest watching the market, it will see it coming. And it will show up in the form of heavy selling and increased volume in the stock market, but if you want to watch for yourself in the data, I would specifically watch average wages for consistent increases.

If you made it this far.. good work. :) Future blog posts will have many more charts and more technical analysis.